Free to Choose? Dimensions of Private Sector Wage Contract Re-Negotiation since 1979

The deregulation of the system of pay determination in Britain in 1979 was intended to give employers the freedom to determine wage increases without the restriction of pay norms or statutory limits. Yet thirteen years later, despite a rise in productivity, nominal wage growth and the growth of unit labour costs were still widely perceived as enduring economic problems. This paper addresses the influence of industrial relations institutions and labour market pressure upon wage increases between 1979 and 1994 using evidence from the CBI's Pay Databank. Despite the direction of government policy, the external institutional forces of the labour market, particularly the rate of inflation and comparability, appear to have exerted an enduring influence on pay determination.